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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Law of Demand
Perfectly competitive long-run equilibrium
Constrained Utility Maximization
Luxury
2. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Perfect competition
Productive Efficiency
Free-Rider Problem
Opportunity Cost
3. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Complementary Goods
Derived Demand
Price floor
Free-Rider Problem
4. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Least-Cost Rule
Price discrimination
Perfect competition
Public goods
5. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Resources
Excess Capacity
Total Revenue Test
Average Total Cost (ATC)
6. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Price inelastic demand
Oligopoly
Luxury
Income Effect
7. The output where ATC is minimized and economic profit is zero
Monopolistic competition
Law of Supply
Break-even Point
Allocative Efficiency
8. The marginal utility from consumption of more and more of that item falls over time
Law of Diminishing Marginal Utility
Law of Increasing Costs
Consumer surplus
Price inelastic demand
9. Ed = 1
Unit elastic demand
Cross-Price Elasticity of Demand
Normal Goods
Increasing Cost Industry
10. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Marginal Cost (MC)
Opportunity Cost
Dead Weight Loss
Excess Capacity
11. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Necessity
Resources
Derived Demand
Total variable costs (TVC)
12. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Price Ceiling
Complementary Goods
Marginal Revenue Product (MRP)
Monopoly
13. Ei > 1
Oligopoly
Average Variable Cost (AVC)
Total Revenue Test
Luxury
14. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Market power
Marginal Productivity Theory
Private goods
Surplus
15. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Total variable costs (TVC)
Determinants of Demand
Fixed inputs
Monopolistic competition
16. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Determinants of Demand
Marginal Analysis
Price Ceiling
17. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Normal Profit
Natural Monopoly
Average Total Cost (ATC)
Private goods
18. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Derived Demand
Complementary Goods
Monopolistic competition
Unit elastic demand
19. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Absolute Advantage
Four-firm concentration ratio
Profit Maximizing Resource Employment
Diseconomies of Scale
20. Models where firms agree to mutually improve their situation
Price elasticity
Cross-Price Elasticity of Demand
Income Elasticity
Collusive oligopoly
21. A good for which higher income increases demand
Normal Goods
Total variable costs (TVC)
Excess Capacity
Spillover benefits
22. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Variable inputs
Cartel
Monopolistic competition
Complementary Goods
23. 0 < Ei < 1
Monopoly long-run equilibrium
Income Effect
Necessity
Excise Tax
24. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Unit elastic demand
Monopoly
Perfect competition
Oligopoly
25. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Absolute prices
Private goods
Monopolistic competition
Economics
26. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Negative externality
Private goods
Marginal tax rate
Average Total Cost (ATC)
27. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Determinants of Demand
Allocative Efficiency
Free-Rider Problem
Public goods
28. A good for which higher income decreases demand
Inferior Goods
Determinants of Supply
Consumer surplus
Economies of Scale
29. The total quantity - or total output of a good produced at each quantity of labor employed
Price Elasticity of Supply
Non-collusive oligopoly
Total Product of Labor (TPL)
Marginal Revenue Product (MRP)
30. Exists if a producer can produce more of a good than all other producers
Absolute Advantage
Producer surplus
Price floor
Total Revenue
31. Es = (%dQs) / (%dPrice)
Complementary Goods
Marginal Cost (MC)
Profit Maximizing Resource Employment
Price Elasticity of Supply
32. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Shutdown Point
Marginal Revenue Product (MRP)
Marginal Benefit (MB)
Surplus
33. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Absolute prices
Productive Efficiency
Subsidy
Perfectly inelastic
34. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Least-Cost Rule
Producer surplus
Substitute Goods
Complementary Goods
35. Product demand - productivity - prices of other resources - and complementary resources
Collusive oligopoly
Determinants of Labor Demand
Determinants of Demand
Constant Returns to Scale
36. The difference between total revenue and total explicit costs
Income Elasticity
Accounting Profit
Fixed inputs
Market power
37. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Determinants of Labor Demand
Increasing Cost Industry
Producer surplus
Spillover costs
38. AVC = TVC/Q
Average Variable Cost (AVC)
Normal Profit
Marginal Revenue Product (MRP)
Price inelastic demand
39. The price of a good measured in units of currency
Constant Returns to Scale
Marginal Analysis
Monopolistic competition long-run equilibrium
Absolute prices
40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Spillover benefits
Oligopoly
Determinants of Demand
Allocative Efficiency
41. Ed = (%dQd)/(%dP). Ignore negative sign
Total Fixed Costs (TFC)
Price elasticity
Monopolistic competition
Price discrimination
42. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Average Total Cost (ATC)
Collusive oligopoly
Total Fixed Costs (TFC)
Absolute prices
43. A firm that has market power in the factor market (a wage-setter)
Oligopoly
Total Welfare
Increasing Cost Industry
Monopsonist
44. Entry of new firms shifts the cost curves for all firms downward
Price elastic demand
Decreasing Cost industry
Marginal Analysis
Long Run
45. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Long Run
Excess Capacity
Implicit costs
Short run
46. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Law of Increasing Costs
Consumer surplus
Monopsonist
Excess Capacity
47. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Marginal Resource Cost (MRC)
Economic Growth
Law of Demand
Increasing Cost Industry
48. Costs that change with the level of output. If output is zero - so are TVCs.
Positive externality
Total Product of Labor (TPL)
Negative externality
Total variable costs (TVC)
49. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Marginal Revenue Product (MRP)
Determinants of Labor Demand
Perfect competition
Absolute prices
50. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Marginal Analysis
Oligopoly
Short run
Price Ceiling